Volatility Past, Time to Buy Boeing, Xerox and Morgan Stanley?

By Ben Levisohn

The market is running in place today but the VIX continues to drop and that could be a good sign for Boeing (BA), Xerox (XRX), Jacobs Engineering (JEC), Consol Energy (CNX) and Morgan Stanley (MS).

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Traders work in the VIX, or Volatility Index, pit at the Chicago Board Options Exchange in Chicago on December 18, 2013.

MKM Partners’ Jim Strugger explains:

We think probability favors the current volatility event having peaked and continuing to dissipate. A 21.40 high in spot VIX and 5.8% pullback for the S&P 500 Index (SPX, 1797.02) rank it among the more intense of the 13-month old low-volatility regime. If correct – and we’ll await a sustained
decline below the 14 level in VIX for confirmation – stocks are set to work higher from recent oversold positions.

To identify stocks that may be best positioned to recover from the recent pullback we screened SPX constituents for those that won’t report until after March options expiration, had EPS that beat consensus forecasts in the most recent quarter and are trading above their 200-day moving average. The remaining were ranked equally by the degree of pullback since the January 22 highs and upside to the consensus price target. We’re looking to isolate stocks whose recent poor performance is most likely the result of increased correlation rather than company-specific factors.

Among the hardest hit companies: Boeing, which had dropped 6.9% in 2014 through Friday Xerox, which had fallen 14%, Jacobs Engineering, which had dropped 5%, Consol Energy, which has declined 4.1%, and Morgan Stanley, which is off 5.2% this year..

Today, that group is having mixed results. Boeing is little changed at $126.98 at 2:51 p.m., Xerox has risen 0.2% to $10.43, Jacobs Engineering has fallen 0.5% to $59.55, Consol Energy has gained 1.4% to $37 and Morgan Stanley has advanced 0.2% to $29.74. The VIX has dropped 1% to 15.14.

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Earnings reports, corporate strategies and analyst insights are all part of what moves stocks, and they’re all covered by the Stocks to Watch blog. We also look at macro issues, investor sentiments and hidden trends that are affecting the market. Stocks to Watch gives you the full picture of the U.S. stock markets, all day long.

The blog is written by Ben Levisohn, a former stock trader who has covered financial markets for the Wall Street Journal, Bloomberg and BusinessWeek.